What does it mean when we say that India has been put in the Currency Manipulator list by the US Government? Are there are any major reasons to really worry about?

To begin with let me clarify that there are two lists here. There is a Currency Manipulator list put out by the US Treasury and India is not a part of that list as of now. Then there is the Currency Watchlist and India is currently included in this list where the US apprehends that Indian RBI may be artificially keeping the Indian rupee weak to boost exports to the US.

What the US has done is to issue a warning that India had been put on the currency watch-list for alleged manipulation of the rupee. Being included in the currency manipulator list is the next step. Remember, this is not an official list by any independent agency. It is a list issued by the US Treasury for countries that run trade surplus of over $20 bn with the US.

Normally, countries are first put on a watchlist to check if such countries are artificially weakening their currency to boost exports to the US. Currently, the US is India’s largest trading partner and has been consistently running trade surplus with the US. Declaring a country as currency manipulator is the second step after putting on the watchlist.

It must be noted that the US had recently listed Switzerland and Vietnam as Currency Manipulators. At the same time, countries like India, Thailand and Taiwan have been put on the currency watchlist where they will be under observation and if the US finds confirmation of such currency manipulation then appropriate action including penalties may be imposed.

In the past, the US had accused several countries including Japan, China and even Germany of adopting manipulative tactics to keep their currencies weak versus the dollar. This tag has acquired a lot more prominence under Trump who appears to revel in ignoring the basic rule of trade globally. Such charges are hard to prove but India must know what this implies.